29 The interaction of aggregate demand and supply

Question 1

Short run macroequilibrium equilibrium

Answer 1

AD increases
- PL increases
- Real GDP increases
AD decreases
- PL decreases
- Real GDP decreases
AS increases
- PL decreases
- Real GDP increases
AS decreases
- PL increases
- Real GDP decreases

Question 2

Long run macroequilibrium neoclassical equilibrium

Answer 2

AD increases
- PL increase
- no change in real GDP
AD decreases
- PL decreases
- no change in real GDP
AS increases
- PL decreases
- real GDP increases
AS decreases
- PL increase
- real GDP decreases

Question 3

Long run macroequilibrium keynsian equilibrium

Answer 3

Expends onto the position on AD as horizontal gives no change in price whereas horizontal gives biggest price change but no change in quantity